CORE: Royal FloraHolland sows the seeds for a substantial cost saving

Together with Customs, the largest Dutch conglomerate of florists assessed its African supply chain. The main objective was to make import procedures more efficient.

An important mainstay of the CORE programme was a pilot led by Royal FloraHolland. Roel Huiden, Senior Supply Chain Consultant at the auction cooperative, tells about the demonstration project, which yielded numerous insights into the air freight chain between Nairobi and Schiphol airport. “Anything you can digitalise overseas, makes the import process easier in the Netherlands.”

 That bouquet of roses you buy at a petrol station or in a market very probably comes from Kenya. The country is one of the main suppliers of the popular cut flower, which finds its way to the EU via the auction of Royal FloraHolland. “We receive approximately 120,000 tons of flowers from our growers in East Africa every year,” says Huiden. “Everything there grows in greenhouses just as it does in the Netherlands, but the temperature does not need to be regulated there thanks to a favourable climate. Labour costs are also lower there.”

No high-risk country
The bulk of the goods arrive in the Netherlands by air. Because of the speed of delivery, air freight is the standard for intercontinental flower transport. Nonetheless, the route from Kenyan greenhouses to European florists is still over five days, so logistically there is room for improvement. “With Customs, we placed the emphasis, in the demonstration project, on the delivery of shipments to our marketplaces, like the one in Aalsmeer. How can we together ensure that the shipments arrive in the Netherlands safely and quickly? For Customs, Kenya is not a high-risk country. However, much can be gained in the import procedures, considering the large number of shipments. Certain procedures can be settled more efficiently with better insight into the origin and destination. The latter is a complicated story in the flower world. In the Netherlands, many flowers are auctioned a day after import, and only then is the definitive value determined. This makes it difficult to determine the customs value at import. The import levy is, moreover, zero percent, since the flowers are designated as goods of preferential origin.”

The Netherlands Food and Consumer Product Safety Authority (NVWA) sees it differently, explains Huiden. “This body wants to prevent flowers entering the EU that are contaminated with insects, such as thrips or the African false codling moth. It all begins with a thorough inspection by the Kenyan authorities. You can see the inspection of the NVWA as a kind of audit of the work of their colleagues in Africa.”

Dependable partners
For both FloraHolland and Customs, the CORE project was a voyage of discovery, explains Huiden. “The agency knew, of course, that large quantities of flowers were coming to the Netherlands, but did not know what role FloraHolland fulfilled in the chain. And the goings-on at the airport in Nairobi? It appeared that we knew less about this than we first thought. That was why it was so nice to visit the country together, to meet the local partners with whom we cooperate, and to show how dependable they are. As a grower for FloraHolland, you must satisfy a number of conditions. You may only become a member after showing that you can deliver dependably and subject to observing the regulations of the cooperative. In our turn, we learnt about the perspective of Customs: what information do they require to make a good risk analysis?What can help them and us to speed up the import and export procedures? That you can learn from each other in that way was a significant benefit of the project.”

Paperwork
One of the most important logistical hindrances is the physical phytosanitary certificate, which shows that the products concerned are healthy and not suffering from plant disease. Huiden: “After an inspection, the Kenya Plant Health Inspectorate Services (KEPHIS) issues this certificate if the plants are healthy. The certificate then switches from attaché case to attaché case about seven times! It is first carried by the grower, then the logistics service, the pilot of the airline... And, unfortunately, administration and logistics do not always run in unison. Sometimes the certificate comes just too late, and it has to be carried on the next flight. Or it has arrived in the Netherlands, but has been left hanging around in the office of a transporter. Fortunately, this is now no longer a show stopper. Thanks to digitalisation, Dutch inspectors can now check this using their tablet, although the physical document must still be presented within 48 hours.”

Unfortunately, the phytosanitary certificate is not yet the only physical document in the series of formalities which the exporters in Kenya must satisfy, continues Huiden. “For each shipment, you must pay the airport authority an amount through Customs, for which proof of payment is required. In addition, you must obtain a mandatory export certificate, which is again issued by another body: the Horticultural Crops Directorate. Such organisations often have their own portal, where you can apply for the necessary certificates digitally. But in all cases, you still have to visit the office to obtain a stamp. Most companies employ someone whose sole task is to arrange the paperwork all day long. Anything you can digitalise overseas, makes the import process easier here in the Netherlands.”

A positive point is that Kenya is working hard on this, says Huiden. “The country aspires to setting up an AEO-like certification system, and is busy developing a single window system. Various exporters participated in the first tests. In addition, they could, for example, declare to KEPHIS digitally, and see what body has approved what. Unfortunately, not all the participants are yet connected and the system is used little owing to varying performance. Nevertheless, the Kenyan government has with all its efforts demonstrated that it believes modernisation is important.”

More control over the chain
The digitalisation of processes dovetails seamlessly with CORE. How did this translate into the development of a data pipeline?Huiden: “In fact, we are talking about a network of networks: interconnected source systems, such as those of the two participating growers. Their own system, in which they, for example, process orders and create packing lists, is connected to the pipeline. The carrier adds an air shipment number to the information of the growers. Together with the data from and about the exporter, this gives Customs better control over the chain. But other players also achieve better preparedness. When a handling agent at Schiphol airport is subjected to an inspection, the only information often available is a document stating: fresh cut flowers, 300 boxes.If Customs then asks about the content, the handling agent can say nothing more than ‘flowers’. The handling agent can from henceforth say with the aid of the dashboard: boxes 1 to 5 contain roses of 60 centimeter, boxes 6 to 8 contain large-headed roses.”

Clearance at landing
“For as far as we are concerned: FloraHolland finds status information especially useful,” continues Huiden. “When did the aircraft depart, what is the expected arrival time, when did the aircraft company hand over the freight to the handling agent? In the old situation, one would have to make a follow-up call: where is that document, where is the shipment delayed, has the aircraft left yet? However, with a properly working data pipeline, one could retrieve this information with the press of a button. Meanwhile we get an estimated time of arrival forwarded via Cargonaut.Very useful, because if an aircraft is delayed by a few hours, then we can adjust our planning and staff deployment accordingly. The same applies to the customs check at the airport. When all this information comes together in the pipeline, you will be able to combine this intelligently and realise a substantial saving.”

Huiden sees the future with confidence. “We now first have an NVWA process, followed by the process Entry at the airport and then once again the import process. Better interconnecting these three processes will soon be possible. The arrival of the customs dashboard CRIS will contribute to this directly. Carriers are aware of the possibility of being able to declare in advance, and the NVWA has now acquired permission for a pilot with a fully-paperless phyto-process, in cooperation with Kenya. Expectations are that digital certificates will receive the definitive green light, if the relevant European legislation is amended. As soon as we have set up the dashboard as desired and Customs can access these documents, you will have everything you need to set up a clearance at landing – whereby the various formalities will be settled as much as possible in unison before the aircraft lands. And the flowers can then be transported to their final destination without any waiting time. Then we will truly have achieved a major breakthrough.”

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